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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.

It started off as something of a slow burner in 2016 but silver is enjoying a phenomenal ride that just like the proverbial ball, has rolled and rolled and rolled into a two-year high and a near-50% year-to-date rise.

Silver spiked last week and continued that through much of the Asian session to go north of $21/oz before settling into the $20.50/oz zone in the hour before the European session opened.

"Silver was up 11% last week but that did not seem to be enough as it pushed for another 7% higher this morning", says Saxo Bank's Asia macro strategist Kay Van-Petersen, reporting out of Singapore. "In general, there has been this incredible melt-up of risk-on and risk-off assets like the swiss franc, the yen and bonds":

"Silver's ratio to gold has collapsed", says Ole Hansen, Saxo Bank's head of commodities strategy. "It's enjoying a bit of the same input as a few years ago when it hit $50/oz with strong investment demand and industrial demand combining with supply dwindling":

"Silver is obviously high beta gold", he adds.

The ratio to silver is in at 66.20 from above 80 in March and Hansen says there is still room for that to come into 60, allowing scope for further upside, relative to gold.

A bout of short-covering in Shanghai, however, could signal that open interest is coming down and the rally might be struggling for further momentum even as he precious metal rises on Comex. "We've cleared the desk in terms of stops and now the market is looking at relative value", says Saxo's commodities chief.

Hansen anticipates some retracement could be on the cards with $19.90/oz the key area. "We need gold to continue to outperform to help push silver higher but we could see some retracement".

Silver peaked at above $21/oz during the Asian session but has since the European session opened briefly fallen below $20/oz strengthening the conviction it is due for some retracement

Source: SaxoTradrGO

Silver is not the only metal to be enjoying a stellar run with copper also springing to a two-month high. "This has come from a record short position in copper but there has been a big collapse in the short base while longs have not moved".

ECB speculation

The safe-haven rush to government bonds since Brexit got a further boost at the weekend as speculation that the European Central Bank was considering further twists to its quantitative-easing programmes mounted.

With domino-like precision, landmark after landmark subsequently toppled, as UK short-term gilt yields turned negative for the first time ever, the entire Swiss government curve followed the same pattern sending the 2064 bond to below zero, and Italian and Spanish bond yields also went into the red for the first time ever out to three years.

"This rumour that the ECB was considering twists to its capital allocation was the key", says Michael Boye, fixed income trader at Saxo Bank's Copenhagen office.

"The ECB denied it, but I don't think we've seen the last of this as central banks potentially move towards more QE", says Boye. "We could see more from the ECB at some point and even perhaps direct cooperation with governments in a helicopter-money approach".

US 30-year yields dipped to an all-time low of 2.21% as part of the same wave of buying into the safe-haven sector and the chance that there will only be a single rate hike by the end of 2017 is now priced at just 40%.

"This is a very supportive market for credit markets", says Boye.

Phone home

That was ET's catch phrase from the 1980s blockbuster that wormed its way into our collective affections and if Saxo Bank's head of equities strategy Peter Garnry is to be believed, then the alien life-form might be more inclined towards a Samsung smart phone than an Apple model if he were to hitch up on planet Earth today.

"We continue to be long Samsung and short Apple and we think that the market is completely misunderstanding the momentum that Samsung is curently enjoying in its smart phone business", says Garnry, as we head into earnings this week.

Garnry is also positive on Walgreens, the US conline pharmacy, which should be able to ride the wave of a "domestic US consumption story that is if anything getting stronger".

Pepsi-Cola might reasonably be expected to glide into that slipstream too but there are many macro headwinds building for the drinks manufacturer before it reports Wednesday.

"The emerging-markets story and the health trend means that it is being pushed very hard at the top line", says Saxo's equities chief.

And finally...

We've been so Brexit-dominated these last 3-4 weeks that almost comes as a surprise that we're to see the nonfarm payrolls this week and, after the shocker of a report for May, the focus on this Friday's report for June will be intense.

"It's all about Super Friday", says Van-Petersen. "There is a 180,000 expected rise and it could be a very interesting print. Risk is to the upside".

Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios.

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